SELLER'S AGREEMENT
UNAFFILIATED SELLER'S AGREEMENT
dated as of December 1, 1999
by and among
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION,
as Depositor,
ABFS 1999-4, INC.,
as Unaffiliated Seller
and
AMERICAN BUSINESS CREDIT, INC.,
HOMEAMERICAN CREDIT, INC., D/B/A UPLAND MORTGAGE, and
NEW JERSEY MORTGAGE AND INVESTMENT CORP.,
as Originators
TABLE OF CONTENTS
Page
Article I DEFINITIONS........................................................1
Section 1.01 Definitions...................................................1
Article II PURCHASE, SALE AND CONVEYANCE OF MORTGAGE LOANS...................3
Section 2.01 Agreement to Purchase the Initial Mortgage Loans..............3
Section 2.02 Agreement to Purchase the Subsequent Mortgage Loans...........3
Section 2.03 Purchase Price................................................4
Section 2.04 Conveyance of Mortgage Loans; Possession of Mortgage Files....4
Section 2.05 Delivery of Mortgage Loan Documents...........................5
Section 2.06 Acceptance of Mortgage Loans..................................6
Section 2.07 Transfer of Mortgage Loans; Assignment of Agreement...........7
Section 2.08 Examination of Mortgage Files.................................7
Section 2.09 Books and Records.............................................8
Section 2.10 Cost of Delivery and Recordation of Documents.................8
Article III REPRESENTATIONS AND WARRANTIES...................................8
Section 3.01 Representations and Warranties as to the Originators..........8
Section 3.02 Representations and Warranties as to the Unaffiliated
Seller.......................................................11
Section 3.03 Representations and Warranties Relating to the Mortgage
Loans........................................................13
Section 3.04 Representations and Warranties of the Depositor..............25
Section 3.05 Repurchase Obligation for Defective Documentation and for
Breach of a Representation or Warranty.......................26
Article IV THE UNAFFILIATED SELLER..........................................28
Section 4.01 Covenants of the Originators and the Unaffiliated Seller.....28
Section 4.02 Merger or Consolidation......................................29
Section 4.03 Costs........................................................29
Section 4.04 Indemnification..............................................30
Article V CONDITIONS OF CLOSING.............................................32
Section 5.01 Conditions of Depositor's Obligations........................32
Section 5.02 Conditions of Unaffiliated Seller's Obligations..............34
Section 5.03 Termination of Depositor's Obligations.......................35
Article VI MISCELLANEOUS....................................................35
Section 6.01 Notices......................................................35
Section 6.02 Severability of Provisions...................................36
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Page
Section 6.03 Agreement of Unaffiliated Seller.............................36
Section 6.04 Survival.....................................................36
Section 6.05 Effect of Headings and Table of Contents.....................36
Section 6.06 Successors and Assigns.......................................36
Section 6.07 Confirmation of Intent; Grant of Security Interest...........36
Section 6.08 Miscellaneous................................................37
Section 6.09 Amendments...................................................37
Section 6.10 Third-Party Beneficiaries....................................38
Section 6.11 GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF
JURY TRIAL...................................................38
Section 6.12 Execution in Counterparts....................................39
SCHEDULES AND EXHIBITS
Schedule I - Mortgage Loan Schedule
Exhibit A - Form of Subsequent Transfer Agreement
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This UNAFFILIATED SELLER'S AGREEMENT, dated as of December 1, 1999
(this "Agreement"), by and among PRUDENTIAL SECURITIES SECURED FINANCING
CORPORATION, a Delaware corporation, (the "Depositor"), ABFS 1999-4, INC., a
Delaware corporation (the "Unaffiliated Seller"), AMERICAN BUSINESS CREDIT,
INC., a Pennsylvania corporation ("ABC"), HOMEAMERICAN CREDIT, INC. D/B/A UPLAND
MORTGAGE, a Pennsylvania corporation ("Upland") and NEW JERSEY MORTGAGE AND
INVESTMENT CORP., a New Jersey corporation ("NJMIC", and together with ABC and
Upland, the "Originators").
W I T N E S S E T H:
WHEREAS, Schedule I attached hereto and made a part hereof lists
certain fixed rate business purpose loans and consumer purpose first and second
lien mortgage loans (the "Mortgage Loans") owned by the Originators that the
Originators desire to sell to the Unaffiliated Seller, the Unaffiliated Seller
desires to sell to the Depositor and that the Depositor desires to purchase; and
WHEREAS, it is the intention of the Originators, the Unaffiliated
Seller and the Depositor that simultaneously with the Originators' conveyance of
the Mortgage Loans to the Unaffiliated Seller and the Unaffiliated Seller's
conveyance of the Mortgage Loans to the Depositor on the Closing Date, (a) the
Depositor shall sell the Mortgage Loans to the ABFS Mortgage Loan Trust 1999-4,
a Delaware statutory business trust (the "Trust") pursuant to a Sale and
Servicing Agreement to be dated as of December 1, 1999 (the "Sale and Servicing
Agreement"), to be entered into by and among the Depositor, as depositor, the
Trust, as issuer, ABC, as servicer (in such capacity, the "Servicer"), Chase
Bank of Texas, N.A., a national banking association, as collateral agent (the
"Collateral Agent"), and The Bank of New York, a New York banking corporation,
as indenture trustee (the "Indenture Trustee"), and (b) the Trust shall issue
its Mortgage Backed Notes (the "Notes"), pursuant to an Indenture, to be dated
as of December 1, 1999 (the "Indenture"), by and between the Trust and the
Indenture Trustee, which Notes will be secured by a pledge of the assets of the
Trust.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions. (a) Whenever used herein, the following words
and phrases, unless the context otherwise requires, shall have the meanings
specified in this Article I:
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Prospectus" means the Prospectus dated June 23, 1999 relating to the
offering by the Depositor from time to time of its Mortgage Backed Notes
(Issuable in Series) in the form in which it was or will be filed with the
Commission pursuant to Rule 424(b) under the Securities Act with respect to the
offer and sale of the Notes.
"Prospectus Supplement" means the Prospectus Supplement dated December
1, 1999, relating to the offering of the Notes in the form in which it was or
will be filed with the Commission pursuant to Rule 424(b) under the Securities
Act with respect to the offer and sale of the Notes.
"Registration Statement" means that certain registration statement on
Form S-3, as amended (Registration No. 333-75489) relating to the offering by
the Depositor from time to time of its Mortgage Backed Notes (Issuable in
Series) as heretofore declared effective by the Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Termination Event" means the existence of any one or more of the
following conditions:
(a) a stop order suspending the effectiveness of the
Registration Statement shall have been issued or a proceeding for that
purpose shall have been initiated or threatened by the Commission; or
(b) subsequent to the execution and delivery of this
Agreement, a downgrading, or public notification of a possible change,
without indication of direction, shall have occurred in the rating
afforded any of the debt securities or claims paying ability of any
person providing any form of credit enhancement for any of the Notes,
by any "nationally recognized statistical rating organization," as that
term is defined by the Commission for purposes of Rule 436(g)(2) under
the Securities Act; or
(c) subsequent to the execution and delivery of this
Agreement, there shall have occurred an adverse change in the
condition, financial or otherwise, earnings, affairs, regulatory
situation or business prospects of the Note Insurer or the Unaffiliated
Seller reasonably determined by the Depositor to be material; or
(d) subsequent to the date of this Agreement there shall have
occurred any of the following: (i) a suspension or material limitation
in trading in securities substantially similar to the Notes; (ii) a
general moratorium on commercial banking activities in the State of New
York declared by either Federal or New York State authorities; or (iii)
the engagement by the United States in hostilities, or the escalation
of such hostilities, or any calamity or crisis, if the effect of any
such event specified in this clause (iii) in the reasonable judgment of
the Depositor makes it impracticable or inadvisable to proceed with the
public offering or the delivery of the Notes on the terms and in the
manner contemplated in the Prospectus Supplement.
(b) Capitalized terms used herein that are not otherwise defined shall
have the respective meanings ascribed thereto in Appendix I to the Indenture.
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ARTICLE II
PURCHASE, SALE AND CONVEYANCE OF MORTGAGE LOANS
Section 2.01 Agreement to Purchase the Initial Mortgage Loans. (a)
Subject to the terms and conditions of this Agreement, the Originators agree to
sell, and the Unaffiliated Seller agrees to purchase on the Closing Date and
immediately subsequent thereto, the Unaffiliated Seller agrees to sell, and the
Depositor agrees to purchase, the Mortgage Loans having the Cut-Off Date
Aggregate Principal Balance or, in accordance with Section 2.08 hereof, such
other balance as is evidenced by the actual Cut-Off Date Aggregate Principal
Balance of the Mortgage Loans accepted by the Depositor on the Closing Date and
listed in the Mortgage Loan Schedule.
(b) Subject to Section 2.08 hereof, the Depositor and the Unaffiliated
Seller have agreed upon which of the Unaffiliated Seller's Mortgage Loans are to
be purchased by the Depositor on the Closing Date pursuant to this Agreement,
and the Unaffiliated Seller has prepared a schedule describing the Mortgage
Loans (the "Mortgage Loan Schedule") setting forth all of the Mortgage Loans to
be purchased under this Agreement, which Mortgage Loan Schedule is attached
hereto as Schedule I. The Mortgage Loan Schedule shall conform to the
requirements of the Depositor and to the definition of "Mortgage Loan Schedule"
in Appendix I to the Indenture.
(c) The closing for the purchase and sale of the Mortgage Loans shall
take place at the offices of Dewey Ballantine LLP, New York, New York, at 10:00
a.m., New York, New York time, on the Closing Date, or such other place and time
as the parties shall agree.
Section 2.02 Agreement to Purchase the Subsequent Mortgage Loans. (a)
Subject to the satisfaction of the conditions set forth in Section 2.14(b) of
the Indenture, (i) in consideration of the Unaffiliated Seller's delivery on the
related Subsequent Transfer Dates to or upon the order of the Originators of all
or a portion of the balance of funds on deposit in the Pre-Funding Accounts, the
Originators shall on any Subsequent Transfer Date sell, transfer, assign, set
over and convey to the Unaffiliated Seller, without recourse, but subject to the
terms and provisions of this Agreement, all of the right, title and interest of
the Originators in and to the Subsequent Mortgage Loans, including all principal
of, and all interest due on, such Subsequent Mortgage Loans, and all other
assets included or to be included in the Trust Estate and (ii) in consideration
of the Depositor's delivery on the related Subsequent Transfer Dates to or upon
the order of the Unaffiliated Seller of all or a portion of the balance of funds
on deposit in the Pre-Funding Accounts, the Unaffiliated Seller shall on any
Subsequent Transfer Date sell, transfer, assign, set over and convey to the
Depositor, without recourse, but subject to the terms and provisions of this
Agreement, all of the right, title and interest of the Unaffiliated Seller in
and to the Subsequent Mortgage Loans, including all principal of, and all
interest due on, such Subsequent Mortgage Loans, and all other assets included
or to be included in the Trust Estate.
The amount released from a Pre-Funding Account with respect to a
transfer of Subsequent Mortgage Loans to the related Pool shall be one-hundred
percent (100%) of the Aggregate Principal Balance of such Subsequent Mortgage
Loans so transferred, as of the related Subsequent Cut-Off Date.
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The obligation of the Depositor to purchase a Subsequent Mortgage
Loan on any Subsequent Transfer Date is subject to the satisfaction of the
requirements set forth in Section 2.14(b) of the Indenture.
Section 2.03 Purchase Price. (a) On the Closing Date, as consideration
for the Originators' sale of the Initial Mortgage Loans to the Unaffiliated
Seller, the Unaffiliated Seller will deliver to the Originators an amount in
cash equal to the sum of (A) 99.70%, 98.7625% and 99.70% of the Original Note
Principal Balance as of the Closing Date of the Class A-1 Notes, Class A-2 Notes
and Class A-3 Notes, respectively, plus (B) accrued interest on the Original
Note Principal Balance of the Class A-1 Notes and Class A-2 Notes at the rate of
7.675% and 7.200% per annum, respectively, from (and including) December 1, 1999
to (but not including) the Closing Date, minus (C) the Original Pre-Funded
Amount and the Original Capitalized Interest Amount for each Class of Notes,
payable by wire transfer of same day funds.
On the Closing Date, as full consideration for the Unaffiliated
Seller's sale of the Initial Mortgage Loans to the Depositor, the Depositor will
deliver to, or at the direction of, the Unaffiliated Seller (i) an amount in
cash equal to the sum of (A) 99.70%, 98.7625% and 99.70% of the Original Note
Principal Balance as of the Closing Date of the Class A-1 Notes, Class A-2 Notes
and Class A-3 Notes, respectively, plus (B) accrued interest on the Original
Note Principal Balance of the Class A-1 Notes and Class A-2 Notes at the rate of
7.675% and 7.200% per annum, respectively, from (and including) December 1, 1999
to (but not including) the Closing Date, minus (C) the Original Pre-Funded
Amount and the Original Capitalized Interest Amount for each Class of Notes,
payable by wire transfer of same day funds, and (ii) the Trust Certificates to
be issued pursuant to the Trust Agreement.
(b) On each Subsequent Transfer Date, as full consideration for the
Originators' sale of the Subsequent Mortgage Loans to the Unaffiliated Seller
and the Unaffiliated Seller's sale of the Subsequent Mortgage Loans to the
Depositor, the Depositor will deliver to the Unaffiliated Seller and the
Unaffiliated Seller will deliver to the Originators an amount in cash equal to
the sum of 100% of the Aggregate Principal Balance of the Subsequent Mortgage
Loans of the related Pool as of the related Subsequent Cut-Off Date.
Section 2.04 Conveyance of Mortgage Loans; Possession of Mortgage
Files. (a) On the Closing Date and on each Subsequent Transfer Date, the
Originators shall sell, transfer, assign, set over and convey to the
Unaffiliated Seller, without recourse, but subject to the terms of this
Agreement, all right, title and interest in and to the applicable Mortgage
Loans, including all principal outstanding as of, and all interest due after,
the related Cut-Off Date, the Insurance Policies relating to each such Mortgage
Loan and all right, title and interest in and to the proceeds of such Insurance
Policies and all of its rights under this Agreement with respect to the Mortgage
Loans from and after the related Cut-Off Date or the Subsequent Cut-Off Date, as
applicable, and the Unaffiliated Seller shall sell, transfer, assign, set over
and convey to the Depositor, without recourse, but subject to the terms of this
Agreement, all right, title and interest in and to the applicable Mortgage
Loans, including all principal outstanding as of, and all interest due after,
the related Cut-Off Date, the Insurance Policies relating to each such Mortgage
Loan, all right, title and interest in and to the proceeds of such Insurance
Policies and all of its rights under this Agreement with respect to the Mortgage
Loans from and after the related Cut-Off Date or the Subsequent Cut-Off Date, as
applicable. Upon payment of the purchase price for
4
such Mortgage Loans as provided in Section 2.03 of this Agreement, the
Originators and the Unaffiliated Seller shall have hereby, and shall be deemed
to have, sold, transferred, assigned, set over and conveyed to the Depositor
such Mortgage Loans, the Insurance Policies relating to each such Mortgage Loan,
all right, title and interest in and to the proceeds of such Insurance Policies
and all of its rights under this Agreement with respect to the Mortgage Loans
from and after the related Cut-Off Date or the Subsequent Cut-Off Date, as
applicable.
(b) Upon the sale of such Mortgage Loans, the ownership of each related
Mortgage Note, each related Mortgage and the contents of the related Mortgage
File shall immediately vest in the Depositor and the ownership of all related
records and documents with respect to each Mortgage Loan prepared by or which
come into the possession of the Originators or the Unaffiliated Seller shall
immediately vest in the Depositor. The contents of any Indenture Trustee's
Mortgage File in the possession of the Originators or the Unaffiliated Seller at
any time after such sale, and any principal collected and interest due on the
Mortgage Loans after the related Cut-Off Date and received by the Originators or
the Unaffiliated Seller, shall be held in trust by the Originators or the
Unaffiliated Seller for the benefit of the Depositor as the owner thereof, and
shall be promptly delivered by the Originators or the Unaffiliated Seller to or
upon the order of the Depositor.
(c) Pursuant to the Sale and Servicing Agreement, the Depositor shall,
on the Closing Date, assign all of its right, title and interest in and to the
Initial Mortgage Loans to the Trust. Pursuant to the Indenture, the Trust shall,
on the Closing Date, pledge all of its right, title and interest in and to the
Initial Mortgage Loans to the Indenture Trustee, for the benefit of the
Noteholders and the Note Insurer.
Section 2.05 Delivery of Mortgage Loan Documents. (a) On or prior to
the Closing Date or Subsequent Transfer Date, as applicable, the related
Originator shall deliver to the Unaffiliated Seller, and the Unaffiliated Seller
shall deliver to the Collateral Agent, on behalf of the Indenture Trustee (as
pledgee of the Trust pursuant to the Indenture, the Trust being the assignee of
the Depositor pursuant to the Sale and Servicing Agreement), each of the
documents for each applicable Mortgage Loan in accordance with the provisions of
Section 2.05 of the Sale and Servicing Agreement.
(b) As promptly as practicable, but in any event within thirty (30)
days from the Closing Date or the Subsequent Transfer Date, as applicable, the
Unaffiliated Seller shall promptly submit, or cause to be submitted by the
related Originator, for recording in the appropriate public office for real
property records, each assignment referred to in Section 2.05(a)(iv) of the Sale
and Servicing Agreement. The Collateral Agent, on behalf of the Indenture
Trustee, shall be required to retain a copy of each assignment submitted for
recording. In the event that any such assignment is lost or returned unrecorded
because of a defect therein, the Unaffiliated Seller or such Originator shall
promptly prepare a substitute assignment or cure such defect, as the case may
be, and thereafter the Unaffiliated Seller or such Originator shall submit each
such assignment for recording.
(c) The Unaffiliated Seller or the related Originator shall, within
five (5) Business Days after the receipt thereof, deliver or cause to be
delivered to the Collateral Agent, on behalf of the Indenture Trustee (as
pledgee of the Trust pursuant to the Indenture, the Trust
5
being the assignee of the Depositor pursuant to the Sale and Servicing
Agreement): (i) the original recorded Mortgage and related power of attorney, if
any, in those instances where a copy thereof certified by the related Originator
was delivered to the Collateral Agent, on behalf of the Indenture Trustee,
pursuant to Section 2.05 of the Sale and Servicing Agreement; (ii) the original
recorded assignment of Mortgage from the related Originator to the Indenture
Trustee, which, together with any intervening assignments of Mortgage, evidences
a complete chain of assignment from the originator of the Mortgage Loan to the
Indenture Trustee in those instances where copies of such assignments certified
by the related Originator were delivered to the Collateral Agent, on behalf of
the Indenture Trustee, pursuant to Section 2.05 of the Sale and Servicing
Agreement; and (iii) the title insurance policy or title opinion required in
Section 2.05(a)(vi) of the Sale and Servicing Agreement.
Notwithstanding anything to the contrary contained in this Section
2.05, in those instances where the public recording office retains the original
Mortgage, power of attorney, if any, assignment or assignment of Mortgage after
it has been recorded or such original has been lost, the Unaffiliated Seller or
the related Originator shall be deemed to have satisfied its obligations
hereunder upon delivery to the Collateral Agent, on behalf of the Indenture
Trustee, of a copy of such Mortgage, power of attorney, if any, assignment or
assignment of Mortgage certified by the public recording office to be a true
copy of the recorded original thereof.
From time to time the Unaffiliated Seller or the related Originator may
forward or cause to be forwarded to the Collateral Agent, on behalf of the
Indenture Trustee, additional original documents evidencing an assumption or
modification of a Mortgage Loan.
(d) All original documents relating to the Mortgage Loans that are not
delivered to the Collateral Agent, on behalf of the Indenture Trustee, as
permitted by Section 2.05(a) hereof are and shall be held by the Servicer, the
Unaffiliated Seller or the related Originator in trust for the benefit of the
Indenture Trustee, on behalf of the Noteholders and the Note Insurer. In the
event that any such original document is required pursuant to the terms of this
Section 2.05 to be a part of an Indenture Trustee's Mortgage File, such document
shall be delivered promptly to the Collateral Agent, on behalf of the Indenture
Trustee. From and after the sale of the Mortgage Loans to the Depositor pursuant
hereto, to the extent that the Unaffiliated Seller or the related Originator
retains legal title of record to any Mortgage Loans prior to the vesting of
legal title in the Indenture Trustee, such title shall be retained in trust for
the Trust as the owner of the Mortgage Loans, as the Depositor's assignee, and
the Indenture Trustee, as the Trust's pledgee.
Section 2.06 Acceptance of Mortgage Loans. (a) To evidence the transfer
of the Mortgage Loans and related Mortgage Files to the Collateral Agent, on
behalf of the Indenture Trustee, the Collateral Agent shall deliver the
acknowledgement of receipt, the Initial Certification and the Final
Certification required to be delivered pursuant to Section 2.06(b) of the Sale
and Servicing Agreement.
(b) The Sale and Servicing Agreement provides that, if the Collateral
Agent during the process of reviewing the Indenture Trustee's Mortgage Files,
finds any document constituting a part of an Indenture Trustee's Mortgage File
which is not executed, has not been received, is unrelated to the Mortgage Loan
identified in the Mortgage Loan Schedule, or does
6
not conform to the requirements of Section 2.05 of the Sale and Servicing
Agreement or the description thereof as set forth in the Mortgage Loan Schedule,
the Collateral Agent shall promptly so notify the Servicer, the Unaffiliated
Seller, the Indenture Trustee, the related Originator and the Note Insurer. The
Unaffiliated Seller and the Originators agree that in performing any such
review, the Collateral Agent may conclusively rely on the Unaffiliated Seller
and the Originators as to the purported genuineness of any such document and any
signature thereon. Each of the Originators and the Unaffiliated Seller agrees to
use reasonable efforts to remedy a material defect in a document constituting
part of an Indenture Trustee's Mortgage File of which it is notified. If,
however, within sixty (60) days after such notice neither the Unaffiliated
Seller nor any Originator has remedied the defect and the defect materially and
adversely affects the interest of the Noteholders in the related Mortgage Loan
or the interests of the Note Insurer, then the Unaffiliated Seller and the
Originators shall be obligated to either substitute in lieu of such Mortgage
Loan a Qualified Substitute Mortgage Loan or purchase such Mortgage Loan in the
manner and subject to the conditions set forth in Section 3.05 hereof.
(c) The failure of the Collateral Agent, the Indenture Trustee or the
Note Insurer to give any notice contemplated herein within the time periods
specified above shall not affect or relieve the Unaffiliated Seller's or the
Originators obligation to repurchase for any Mortgage Loan pursuant to this
Section 2.06 or Section 3.05 of this Agreement.
Section 2.07 Transfer of Mortgage Loans; Assignment of Agreement. The
Originators and the Unaffiliated Seller each hereby acknowledges and agrees that
the Depositor or the Trust may assign its interest under this Agreement to the
Indenture Trustee as may be required to effect the purposes of the Indenture and
the Sale and Servicing Agreement, without further notice to, or consent of, the
Unaffiliated Seller or the Originators, and the Indenture Trustee shall succeed
to such of the rights and obligations of the Depositor and the Trust hereunder
as shall be so assigned. The Depositor shall, pursuant to the Sale and Servicing
Agreement, assign all of its right, title and interest in and to the Mortgage
Loans and its right to exercise the remedies created by Sections 2.06 and 3.05
hereof for breaches of the representations, warranties, agreements and covenants
of the Unaffiliated Seller or the Originators contained in Sections 2.05, 2.06,
3.02 and 3.03 hereof to the Trust, and the Trust shall, pursuant to the
Indenture, pledge such right, title and interest to the Indenture Trustee, for
the benefit of the Noteholders and the Note Insurer. Each of the Originators and
the Unaffiliated Seller agrees that, upon such assignment to the Trust and
pledge to the Indenture Trustee, such representations, warranties, agreements
and covenants will run to and be for the benefit of the Indenture Trustee and
the Indenture Trustee may enforce, without joinder of the Depositor or the
Trust, the repurchase obligations of the Unaffiliated Seller and the Originators
set forth herein with respect to breaches of such representations, warranties,
agreements and covenants.
Section 2.08 Examination of Mortgage Files. Prior to the Closing Date
and each Subsequent Transfer Date, as applicable, the Unaffiliated Seller shall
make the Mortgage Files available to the Depositor or its designee for
examination at the Unaffiliated Seller's offices or at such other place as the
Unaffiliated Seller shall reasonably specify. Such examination may be made by
the Depositor or its designee at any time on or before the Closing Date or
Subsequent Transfer Date, as the case may be. If the Depositor or its designee
makes such examination prior to the Closing Date or Subsequent Transfer Date, as
the case may be, and
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identifies any Mortgage Loans that do not conform to the requirements of the
Depositor as described in this Agreement, such Mortgage Loans shall be deleted
from the Mortgage Loan Schedule and may be replaced, prior to the Closing Date
or Subsequent Transfer Date, as the case may be, by substitute Mortgage Loans
acceptable to the Depositor. The Depositor may, at its option and without notice
to the Unaffiliated Seller, purchase all or part of the Mortgage Loans without
conducting any partial or complete examination. The fact that the Depositor, the
Collateral Agent or the Indenture Trustee has conducted or has failed to conduct
any partial or complete examination of the Mortgage Files shall not affect the
rights of the Depositor or the Indenture Trustee to demand repurchase or other
relief as provided in this Agreement.
Section 2.09 Books and Records. The transfer of each Mortgage Loan
shall be reflected on each of the Originators' and the Unaffiliated Seller's
accounting and other records, balance sheet and other financial statements as a
sale of assets by the Originators to the Unaffiliated Seller, by the
Unaffiliated Seller to the Depositor and by the Depositor to the Trust;
provided, that the Unaffiliated Seller's tax returns shall not reflect the
transfer from the Unaffiliated Seller to the Depositor and from the Depositor to
the Trust as a sale of the Mortgage Loans. Each of the Originators and the
Unaffiliated Seller shall be responsible for maintaining, and shall maintain, a
complete set of books and records for each Mortgage Loan which shall be clearly
marked to reflect the ownership of each Mortgage Loan by the Trust, and the
pledge of each Mortgage Loan by the Trust to the Indenture Trustee, for the
benefit of the Noteholders and the Note Insurer.
Section 2.10 Cost of Delivery and Recordation of Documents. The costs
relating to the delivery and recordation of the documents in connection with the
Mortgage Loans as specified in this Article II and in Article II of the Sale and
Servicing Agreement shall be borne by the Unaffiliated Seller or the
Originators.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations and Warranties as to the Originators. Each
of the Originators hereby represents and warrants to the Unaffiliated Seller and
the Depositor, as of the Closing Date, that:
(a) The Originator is a corporation duly organized, validly
existing and in good standing under the laws of (i) with respect to ABC
and Upland, the State of Pennsylvania, or (ii) with respect to NJMIC,
the State of New Jersey, and has all licenses necessary to carry on its
business as now being conducted and is licensed, qualified and in good
standing in each state where a Mortgaged Property is located if the
laws of such state require licensing or qualification in order to
conduct business of the type conducted by the Originator and to perform
its obligations as the Originator hereunder, and in any event the
Originator is in compliance with the laws of any such state to the
extent necessary to ensure the enforceability of the related Mortgage
Loan; the Originator has the full power and authority, corporate and
otherwise, to execute and deliver this Agreement and to perform in
accordance herewith; the execution, delivery and performance of this
Agreement (including all instruments of transfer to be delivered
8
pursuant to this Agreement) by the Originator and the consummation of
the transactions contemplated hereby have been duly and validly
authorized; this Agreement evidences the valid, binding and enforceable
obligation of the Originator; and all requisite corporate action has
been taken by the Originator to make this Agreement valid and binding
upon the Originator in accordance with its terms;
(b) No consent, approval, authorization or order of any court
or governmental agency or body is required for the execution, delivery
and performance by the Originator of, or compliance by the Originator
with, this Agreement or the sale of the Mortgage Loans pursuant to the
terms of this Agreement or the consummation of the transactions
contemplated by this Agreement, or if required, such approval has been
obtained prior to the Closing Date;
(c) Neither the execution and delivery of this Agreement, the
acquisition nor origination of the Mortgage Loans by the Originator or
the transactions contemplated hereby, nor the fulfillment of or
compliance with the terms and conditions of this Agreement, has or will
conflict with or result in a breach of any of the terms, conditions or
provisions of the Originator's charter or by-laws or any legal
restriction or any agreement or instrument to which the Originator is
now a party or by which it is bound or to which its property is
subject, or constitute a default or result in an acceleration under any
of the foregoing, or result in the violation of any law, rule,
regulation, order, judgment or decree to which the Originator or its
property is subject, or impair the ability of the Indenture Trustee (or
the Servicer as the agent of the Indenture Trustee) to realize on the
Mortgage Loans, or impair the value of the Mortgage Loans;
(d) Neither this Agreement nor the information contained in
the Prospectus Supplement (other than the information under the caption
"Underwriting") nor any statement, report or other document prepared by
the Originator and furnished or to be furnished pursuant to this
Agreement or in connection with the transactions contemplated hereby
contains any untrue statement or alleged untrue statement of any
material fact or omits to state a material fact necessary to make the
statements contained herein or therein, in light of the circumstances
under which they were made, not misleading;
(e) There is no action, suit, proceeding or investigation
pending or, to the knowledge of the Originator, threatened before a
court, administrative agency or government tribunal against the
Originator which, either in any one instance or in the aggregate, may
result in any material adverse change in the business, operations,
financial condition, properties or assets of the Originator, or in any
material impairment of the right or ability of the Originator to carry
on its business substantially as now conducted, or in any material
liability on the part of the Originator, or which would draw into
question the validity of this Agreement, the Mortgage Loans, or of any
action taken or to be taken in connection with the obligations of the
Originator contemplated herein, or which would impair materially the
ability of the Originator to perform under the terms of this Agreement
or that will prohibit its entering into this Agreement or the
consummation of any of the transactions contemplated hereby;
9
(f) The Originator is not in violation of or in default with
respect to, and the execution and delivery of this Agreement by the
Originator and its performance of and compliance with the terms hereof
will not constitute a violation or default with respect to, any order
or decree of any court or any order, regulation or demand of any
federal, state, municipal or governmental agency, which violation or
default might have consequences that would materially and adversely
affect the condition (financial or other) or operations of the
Originator or its properties or might have consequences that would
materially and adversely affect its performance hereunder or under any
subservicing agreement;
(g) Upon the receipt of each Mortgage File by the Depositor
(or its assignee) under this Agreement, the Depositor (or its assignee)
will have good title to each related Mortgage Loan and such other items
comprising the corpus of the Trust Estate free and clear of any lien
created by the Originator (other than liens which will be
simultaneously released);
(h) The consummation of the transactions contemplated by this
Agreement are in the ordinary course of business of the Originator, and
the transfer, assignment and conveyance of the Mortgage Notes and the
Mortgages by the Originator pursuant to this Agreement are not subject
to the bulk transfer or any similar statutory provisions in effect in
any applicable jurisdiction;
(i) With respect to any Mortgage Loan purchased by the
Originator, the Originator acquired title to the Mortgage Loan in good
faith, without notice of any adverse claim;
(j) The Originator does not believe, nor does it have any
reason or cause to believe, that it cannot perform each and every
covenant contained in this Agreement. The Originator is solvent and the
sale of the Mortgage Loans by the Originator pursuant to the terms of
this Agreement will not cause the Originator to become insolvent. The
sale of the Mortgage Loans by the Originator pursuant to the terms of
this Agreement was not undertaken with the intent to hinder, delay or
defraud any of the Originator's creditors;
(k) The Mortgage Loans are not intentionally selected in a
manner so as to affect adversely the interests of the Depositor or of
any transferee of the Depositor (including the Trust and the Indenture
Trustee);
(l) The Originator has determined that it will treat the
disposition of the Mortgage Loans pursuant to this Agreement as a sale
for accounting and tax purposes;
(m) The Originator has not dealt with any broker or agent or
anyone else that may be entitled to any commission or compensation in
connection with the sale of the Mortgage Loans to the Depositor other
than to the Depositor or an affiliate thereof; and
(n) The consideration received by the Originator upon the sale
of the Mortgage Loans under this Agreement constitutes fair
consideration and reasonably equivalent value for the Mortgage Loans.
10
Section 3.02 Representations and Warranties as to the Unaffiliated
Seller. The Unaffiliated Seller hereby represents and warrants to the Depositor,
as of the Closing Date, that:
(a) The Unaffiliated Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware and has all licenses necessary to carry on its business as now
being conducted and is licensed, qualified and in good standing in each
state where a Mortgaged Property is located if the laws of such state
require licensing or qualification in order to conduct business of the
type conducted by the Unaffiliated Seller and to perform its
obligations as the Unaffiliated Seller hereunder, and in any event the
Unaffiliated Seller is in compliance with the laws of any such state to
the extent necessary to ensure the enforceability of the related
Mortgage Loan; the Unaffiliated Seller has the full power and
authority, corporate and otherwise, to execute and deliver this
Agreement and to perform in accordance herewith; the execution,
delivery and performance of this Agreement (including all instruments
of transfer to be delivered pursuant to this Agreement) by the
Unaffiliated Seller and the consummation of the transactions
contemplated hereby have been duly and validly authorized; this
Agreement evidences the valid, binding and enforceable obligation of
the Unaffiliated Seller; and all requisite corporate action has been
taken by the Unaffiliated Seller to make this Agreement valid and
binding upon the Unaffiliated Seller in accordance with its terms;
(b) No consent, approval, authorization or order of any court
or governmental agency or body is required for the execution, delivery
and performance by the Unaffiliated Seller of or compliance by the
Unaffiliated Seller with this Agreement or the sale of the Mortgage
Loans pursuant to the terms of this Agreement or the consummation of
the transactions contemplated by this Agreement, or if required, such
approval has been obtained prior to the Closing Date;
(c) Neither the execution and delivery of this Agreement, the
acquisition nor origination of the Mortgage Loans by the Unaffiliated
Seller nor the transactions contemplated hereby, nor the fulfillment of
or compliance with the terms and conditions of this Agreement, has or
will conflict with or result in a breach of any of the terms,
conditions or provisions of the Unaffiliated Seller's charter or
by-laws or any legal restriction or any agreement or instrument to
which the Unaffiliated Seller is now a party or by which it is bound or
to which its property is subject, or constitute a default or result in
an acceleration under any of the foregoing, or result in the violation
of any law, rule, regulation, order, judgment or decree to which the
Unaffiliated Seller or its property is subject, or impair the ability
of the Indenture Trustee (or the Servicer as the agent of the Indenture
Trustee) to realize on the Mortgage Loans, or impair the value of the
Mortgage Loans;
(d) Neither this Agreement nor the information contained in
the Prospectus Supplement (other than the information under the caption
"Underwriting") nor any statement, report or other document prepared by
the Unaffiliated Seller and furnished or to be furnished pursuant to
this Agreement or in connection with the transactions contemplated
hereby contains any untrue statement or alleged untrue statement of any
material fact or omits to state a material fact necessary to make the
statements contained
11
herein or therein, in light of the circumstances under which they were
made, not misleading;
(e) There is no action, suit, proceeding or investigation
pending nor, to the knowledge of the Unaffiliated Seller, threatened
before a court, administrative agency or government tribunal against
the Unaffiliated Seller which, either in any one instance or in the
aggregate, may result in any material adverse change in the business,
operations, financial condition, properties or assets of the
Unaffiliated Seller, or in any material impairment of the right or
ability of the Unaffiliated Seller to carry on its business
substantially as now conducted, or in any material liability on the
part of the Unaffiliated Seller, or which would draw into question the
validity of this Agreement, the Mortgage Loans, or of any action taken
or to be taken in connection with the obligations of the Unaffiliated
Seller contemplated herein, or which would impair materially the
ability of the Unaffiliated Seller to perform under the terms of this
Agreement or that will prohibit its entering into this Agreement or the
consummation of any of the transactions contemplated hereby;
(f) The Unaffiliated Seller is not in violation of or in
default with respect to, and the execution and delivery of this
Agreement by the Unaffiliated Seller and its performance of and
compliance with the terms hereof will not constitute a violation or
default with respect to, any order or decree of any court or any order,
regulation or demand of any federal, state, municipal or governmental
agency, which violation or default might have consequences that would
materially and adversely affect the condition (financial or other) or
operations of the Unaffiliated Seller or its properties or might have
consequences that would materially and adversely affect its performance
hereunder or under any subservicing agreement;
(g) Upon the receipt of each Mortgage File by the Depositor
(or its assignee) under this Agreement, the Depositor (or its assignee)
will have good title to each related Mortgage Loan and such other items
comprising the corpus of the Trust Estate free and clear of any lien
created by the Unaffiliated Seller (other than liens which will be
simultaneously released);
(h) The consummation of the transactions contemplated by this
Agreement are in the ordinary course of business of the Unaffiliated
Seller, and the transfer, assignment and conveyance of the Mortgage
Notes and the Mortgages by the Unaffiliated Seller pursuant to this
Agreement are not subject to the bulk transfer or any similar statutory
provisions in effect in any applicable jurisdiction;
(i) With respect to any Mortgage Loan purchased by the
Unaffiliated Seller, the Unaffiliated Seller acquired title to the
Mortgage Loan in good faith, without notice of any adverse claim;
(j) The Unaffiliated Seller does not believe, nor does it have
any reason or cause to believe, that it cannot perform each and every
covenant contained in this Agreement. The Unaffiliated Seller is
solvent and the sale of the Mortgage Loans by the Unaffiliated Seller
pursuant to the terms of this Agreement will not cause the Unaffiliated
12
Seller to become insolvent. The sale of the Mortgage Loans by the
Unaffiliated Seller pursuant to the terms of this Agreement was not
undertaken with the intent to hinder, delay or defraud any of the
Unaffiliated Seller's creditors;
(k) The Mortgage Loans are not intentionally selected in a
manner so as to affect adversely the interests of the Depositor or of
any transferee of the Depositor (including the Trust and the Indenture
Trustee);
(l) The Unaffiliated Seller has determined that it will treat
the disposition of the Mortgage Loans pursuant to this Agreement as a
sale for accounting purposes;
(m) The Unaffiliated Seller has not dealt with any broker or
agent or anyone else that may be entitled to any commission or
compensation in connection with the sale of the Mortgage Loans to the
Depositor other than to the Depositor or an affiliate thereof; and
(n) The consideration received by the Unaffiliated Seller upon
the sale of the Mortgage Loans under this Agreement constitutes fair
consideration and reasonably equivalent value for the Mortgage Loans.
Section 3.03 Representations and Warranties Relating to the Mortgage
Loans. The Originators represent and warrant to the Unaffiliated Seller and the
Unaffiliated Seller represents to the Depositor that, as of the Closing Date, as
to each Initial Mortgage Loan, and as of the Subsequent Transfer Date, as to
each Subsequent Mortgage Loan, immediately prior to the sale and transfer of
such Mortgage Loan by the Unaffiliated Seller to the Depositor:
(a) The information set forth in each Mortgage Loan Schedule
is complete, true and correct;
(b) The information to be provided by the Unaffiliated Seller
or the Originators, directly or indirectly, to the Depositor in
connection with a Subsequent Mortgage Loan will be true and correct in
all material respects at the date or dates respecting which such
information is furnished;
(c) Each Mortgage is a valid first or second lien on a fee
simple (or its equivalent under applicable state law) estate in the
real property securing the amount owed by the Mortgagor under the
Mortgage Note subject only to (i) the lien of current real property
taxes and assessments which are not delinquent, (ii) with respect to
any Mortgage Loan identified on the Mortgage Loan Schedule as secured
by a second lien, the related first mortgage loan, (iii) covenants,
conditions and restrictions, rights of way, easements and other matters
of public record as of the date of recording of such Mortgage, such
exceptions appearing of record being acceptable to mortgage lending
institutions generally in the area wherein the property subject to the
Mortgage is located or specifically reflected in the appraisal obtained
in connection with the origination of the related Mortgage Loan
obtained by the Unaffiliated Seller and (iv) other matters to which
like properties are commonly subject which do not materially interfere
with the benefits of the security intended to be provided by such
Mortgage;
13
(d) Immediately prior to the transfer and assignment by the
related Originator to the Unaffiliated Seller and by the Unaffiliated
Seller to the Depositor, the Unaffiliated Seller or such Originator, as
applicable, had good title to, and was the sole owner of each Mortgage
Loan, free of any interest of any other Person, and the Unaffiliated
Seller or such Originator has transferred all right, title and interest
in each Mortgage Loan to the Depositor or the Unaffiliated Seller, as
applicable;
(e) As of the applicable Cut-Off Date, no payment of principal
or interest on or in respect of any Mortgage Loan remains unpaid for
thirty (30) or more days past the date the same was due in accordance
with the related Mortgage Note without regard to applicable grace
periods;
(f) As of the Initial Cut-Off Date, no Mortgage Loan has a
Mortgage Interest Rate less than 8.25% per annum in Pool I, 7.99% per
annum in Pool II and 8.99% per annum in Pool III and the weighted
average Mortgage Interest Rate of the Mortgage Loans is 11.71% in Pool
I, 11.61% in Pool II and 12.76% in Pool III;
(g) At origination, no Mortgage Loan in Pool I, Pool II or
Pool III had an original term to maturity of greater than 360 months;
(h) As of the Initial Cut-Off Date, the weighted average
remaining term to maturity of the Mortgage Loans is 302 months for the
Mortgage Loans in Pool I, 303 months for the Mortgage Loans in Pool II
and 234 months for the Mortgage Loans in Pool III;
(i) To the best knowledge of the Unaffiliated Seller and each
of the Originators, there is no mechanics' lien or claim for work,
labor or material (and no rights are outstanding that under law could
give rise to such lien) affecting the premises subject to any Mortgage
which is or may be a lien prior to, or equal or coordinate with, the
lien of such Mortgage, except those which are insured against by the
title insurance policy referred to in (ff) below;
(j) To the best knowledge of the Unaffiliated Seller and each
of the Originators, there is no delinquent tax or assessment lien
against any Mortgaged Property;
(k) Such Mortgage Loan, the Mortgage, and the Mortgage Note,
including, without limitation, the obligation of the Mortgagor to pay
the unpaid principal of and interest on the Mortgage Note, are each not
subject to any right of rescission (or any such rescission right has
expired in accordance with applicable law), set-off, counterclaim, or
defense, including the defense of usury, nor will the operation of any
of the terms of the Mortgage Note or the Mortgage, or the exercise of
any right thereunder, render either the Mortgage Note or the Mortgage
unenforceable, in whole or in part, or subject to any right of
rescission, set-off, counterclaim, or defense, including the defense of
usury, and no such right of rescission, set-off, counterclaim, or
defense has been asserted with respect thereto;
14
(l) To the best knowledge of the Unaffiliated Seller and each
of the Originators, the Mortgaged Property is free of material damage
and is in good repair, and there is no pending or threatened proceeding
for the total or partial condemnation of the Mortgaged Property;
(m) Neither the Originators nor the Unaffiliated Seller has
received a notice of default of any first mortgage loan secured by the
Mortgaged Property which has not been cured by a party other than the
Unaffiliated Seller;
(n) Each Mortgage Note and Mortgage are in substantially the
forms previously provided to the Depositor and the Indenture Trustee on
behalf of the Unaffiliated Seller;
(o) No Mortgage Loan had, at the date of origination, a CLTV
in excess of 100% for Pool I, 100% for Pool II and 95.16% for Pool III,
and the weighted average CLTV of all Mortgage Loans as of the Initial
Cut-Off Date is approximately 75.65% in Pool I, 76.23% for Pool II and
70.87% in Pool III;
(p) The Mortgage Loan was not originated in a program in which
the amount of documentation in the underwriting process was limited in
comparison to the originator's normal documentation requirements;
(q) No more than the following percentages of the Mortgage
Loans by Cut-Off Date Aggregate Principal Balance are secured by
Mortgaged Properties located in the following states:
15
Pool I
------------------------------------------
Percentage of
Cut-Off Date
Aggregate
State Principal Balance
-------------------- ------------------
Arkansas 0.16
Colorado 0.19
Connecticut 1.32
Delaware 1.82
Florida 10.07
Georgia 5.15
Illinois 4.13
Indiana 0.54
Iowa 0.09
Kansas 0.06
Kentucky 0.16
Maine 0.15
Maryland 3.36
Massachusetts 0.67
Michigan 0.17
Minnesota 0.15
Mississippi 0.17
Missouri 0.57
New Hampshire 0.31
New Jersey 15.10
New York 27.01
North Carolina 2.48
Ohio 3.96
Pennsylvania 16.20
Rhode Island 0.03
South Carolina 1.06
Tennessee 1.69
Utah 0.14
Vermont 0.43
Virginia 2.45
Washington 0.14
West Virginia 0.06
Wisconsin 0.03
-----------------
100.00%
=================
16
Pool II
------------------------------------------
Percentage of
Cut-Off Date
Aggregate
State Principal Balance
-------------------- ------------------
Alabama 0.11%
Arkansas 0.10
Connecticut 2.08
Delaware 1.91
Florida 10.64
Georgia 4.47
Illinois 6.15
Indiana 0.58
Kentucky 0.24
Maryland 1.65
Massachusetts 1.31
Michigan 0.56
Missouri 0.19
Montana 0.13
Nebraska 0.15
New Jersey 15.24
New York 23.63
North Carolina 2.42
Ohio 4.60
Oklahoma 0.07
Pennsylvania 17.48
Rhode Island 0.09
South Carolina 0.97
Tennessee 1.52
Virginia 3.24
West Virginia 0.46
-----------------
100.00%
=================
17
Pool III
------------------------------------------
Percentage of
Cut-Off Date
Aggregate
State Principal Balance
-------------------- ------------------
Connecticut 5.60%
Florida 4.42
Georgia 2.85
Illinois 5.53
Indiana 1.97
Maryland 3.02
Massachusetts 2.02
Michigan 1.64
New Jersey 20.96
New York 32.02
North Carolina 0.44
Ohio 3.00
Pennsylvania 6.04
South Carolina 0.52
Tennessee 2.49
Texas 1.59
Virginia 6.89
-----------------
100.00%
=================
(r) The Mortgage Loans were not selected by the Unaffiliated
Seller or the Originators for sale hereunder or inclusion in the Trust
Estate on any basis adverse to the Trust Estate relative to the
portfolio of similar mortgage loans of the Unaffiliated Seller or the
Originators;
(s) None of the Mortgage Loans constitutes a lien on leasehold
interests;
(t) Each Mortgage contains customary and enforceable
provisions which render the rights and remedies of the holder thereof
adequate for the realization against the related Mortgaged Property of
the benefits of the security including (A) in the case of a Mortgage
designated as a deed of trust, by trustee's sale and (B) otherwise by
judicial foreclosure. To the best of the Unaffiliated Seller's and the
Originators' knowledge, there is no homestead or other exemption
available to the related Mortgagor which would materially interfere
with the right to sell the related Mortgaged Property at a trustee's
sale or the right to foreclose the related Mortgage. The Mortgage
contains customary and enforceable provisions for the acceleration of
the payment of the Principal Balance of such Mortgage Loan in the event
all or any part of the related Mortgaged Property is sold or otherwise
transferred without the prior written consent of the holder thereof;
(u) The proceeds of such Mortgage Loan have been fully
disbursed, including reserves set aside by the Unaffiliated Seller or
the Originators, there is no requirement for, and neither the
Unaffiliated Seller nor the Originators shall make any, future advances
thereunder. Any future advances made prior to the applicable Cut-Off
Date have been consolidated with the principal balance secured by the
Mortgage, and such principal balance, as consolidated, bears a single
interest rate and single repayment term reflected on the applicable
Mortgage Loan Schedule. The Principal Balance as of the applicable
Cut-Off Date does not exceed the original principal amount of such
Mortgage Loan. Except with respect to no more than $150,000 of escrow
funds, any and all
18
requirements as to completion of any on-site or off-site improvements
and as to disbursements of any escrow funds therefor have been complied
with. All costs, fees, and expenses incurred in making, or recording
such Mortgage Loan have been paid;
(v) All Mortgage Loans were originated in compliance with the
Originators' Underwriting Guidelines;
(w) The terms of the Mortgage and the Mortgage Note have no
